We remain in the early stages of pension freedoms reforms, which in a single stroke transferred huge longevity and investment risk away from insurance companies and onto the consumer.
While this is a great liberation for pension savers, there is a serious threat to retirement prosperity in the UK if consumers fail to grasp the gravitas of the risks they face in drawdown.
It will take years to come to fruition, but there will doubtless be casualties, in turn prompting consumers to place greater value on risk management.
By its very nature, a face-to-face relationship with a financial adviser delivers the peace of mind and security of a personal service from a qualified individual.
And it comes with the added layer of security that holistic financial planning will always consider a client’s wider financial circumstances and start from the very beginning of the client’s story when considering the best course of action to meet their individual needs.
At some firms, retirement planning starts with the basic assumption that income security is the ultimate aim. If you can achieve your desired retirement lifestyle and other financial objectives through an annuity, removing all risk from the equation, why not?
If an annuity does not fit the bill or client needs and objectives mean an alternative income strategy is required, advisers work backward to find the best income strategy to meet individual client needs.
We believe this approach forces clients to work through their retirement income plan rationally in conjunction with their adviser, mitigating the risk that clients leap into drawdown with dollar signs in their eyes and dismiss the importance of income security.
This measured approach to retirement planning means advisers will always be in a position to offer clients security and certainty in their retirement planning, which will always be the primary objective for the vast majority of people approaching retirement.
When times change it is important to change with them. And advisers have done just that since the introduction of pension freedoms last year.
Investment propositions and advice processes have changed significantly to reflect changes in the options available to clients at-retirement.
Advisers are facilitating access to sophisticated planning strategies unlikely to be otherwise available. A good example is access to ‘drawdown on the drip’, allowing clients to take regular income on an ‘encash-as-you-go basis’ and including a portion as tax free cash. As a result clients can keep the maximum level of pension savings fully invested and benefit from future growth potential.
